CIPFA tells Scots Tory tax commission to review government-citizen relationship

14 Aug 15

New tax powers plus continuing pressures on the public finances mean Scotland needs a root-and-branch review of government’s relationship with its citizens, CIPFA has told a tax commission set up by the Scottish Conservatives.

CIPFA’s submission to the Independent Commission for Competitive and Fair Taxation in Scotland says the additional fiscal responsibilities devolved to Holyrood by the 2015 Scotland Bill “do not extend far enough to provide the full set of fiscal levers which will be required to address the significant challenges faced over the coming years”.

It also urges the commission to look at “rebalancing of the relationship between the citizen and the state and moving to a more affordable ‘core and options’ approach” to services.

Alone among the main Scottish parties, the Conservatives refused to join a broad-based commission, chaired by the Scottish Government and the Convention of Scottish Local Authorities, to consider how best to replace the council tax as a way of funding Scottish councils. Instead, they set up their own commission, charged with considering local tax reform within a broader fiscal framework.

CIPFA is urging the Conservative commission to look at broadening the range of tax options open to local government, including giving councils power to levy their own local charges, such as a tourist tax. It wants to increase local accountability by ending government interference in setting of local taxes – implying an end to the council tax freeze – and making it easier for taxpayers to identify charges for Scotland’s publicly-owned water and sewerage services, which are billed alongside the council tax.

“Local tax should be set and raised locally without intervention by the Scottish Government,” the paper says.

It steps up demands for clarification of how Scotland’s block-and-grant spending relationship under the Barnett Formula will function once greater tax-raising power passes to Holyrood. 

Specifically, it questions the ‘no detriment’ principle that devolved tax powers should not disadvantage either Scotland or the UK, given the interaction of devolved taxes with reserved taxes; the economically competitive edge that might be gained through different rates of, for example, airport duties; and the sharing of administration costs between Scotland the rest of the UK.

It warns that the Scottish Government gets insufficient information from London to plan future spending levels properly, and that both its borrowing powers under the new legislation and its right to hold reserves will be very limited.

Continuing austerity, the paper says, will create a need to redefine the relationship between state and people, including a review of protected areas of spending like health and of universal benefits, leading to a ‘core and options’ model of public service provision.

“Some services will be maintained but the population entitled to receive them will be significantly reduced in size,” it predicts. “Some can continue to be offered but only on the basis that some or all citizens will be required to pay user fees or even be the subject of extended means testing.”

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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